Impact of Globalisation on Corporate Social Responsibility around the Environment
Corporate Social Responsibility (CSR) refers to the legal, ethical and political considerations around the environment in which the business operates. Organizations at both local and international levels should operate in a manner that they take into account the critical issues and interests of the various stakeholders. However the question of interest in this discussion pivots around the comprehensive list of “which stakeholder?” should the business be mindful of.The earlier theories on CSR especially in the 1930s mainly focused on the interests of the shareholder as the core existence of a corporation (Weber 2014, p.26). This perspective primarily based on the traditional model of shareholder value theory has been changing and improving gradually to adopt more inclusive models such as the stakeholder’s theory and the global citizenship. In the 1960’s and 70’s matters of consumer protection, rights of minority groups and environmental protection became prominent. In 1980 and 90s, the discussion mainly involved the social impact of corporate raiders and hostile takeovers. Currently, the debate has shifted to focus on long-term issues such as environmental impacts, sustainability of operations as opposed to merely focusing on the short-term motivation of returns. The multinational enterprises (MNEs) efforts have also gone into looking at the welfare of the developing nations (Kerchoffs 2010). The corporations’ perspective has shifted to be part of larger citizens group and therefore taking a bigger role in arrange of issues. (Aupperle et al. 1985,p. 446)
CSR has many definitions but the underlying themes is to ensure that a business operates in such a way to promote sustainability, meets ethical, legal, public and commercial expectations for all its stakeholders(Friedman 1970,p.220).The list comprises of shareholders/investors, the employees, customers, general public and the environment as it is reflected in the policies of the company.Corporate social responsibility implies that a business meets or exceeds the expectations, interests or demands of all these circles. It extends beyond the charitable works or corporate philanthropy.
Globalization is a process mainly characterized by anintensifiedcross-border or transnational interdependence in the social and economic spheres. It, therefore, increases interdependence among institutions and nations (Kerchoffs 2010). The exchanges taking place as a result of the intensified proliferation include political decisions exchange, socio-cultural developments, technological and economic advancements. In the same line, various businesses have expanded their operations across the borders, mainlyin the form of foreign direct investments.
The energy sector, especially regarding petroleum, is one of the quickly emerging issue,especially at the global level. This study people will look into the energy as one of the global sectors and how it has impacted on the CSR of the companies thereof. Furthermore, the study will draw references on theories to explain the various impacts on employees, respective nations and market environment.
Impact of Energy Sector Globalisation on CSR
Some few years ago, in 1993, the case of execution of Ken Saro-Wiwa among others for campaigning against the damages caused by the multinational companies mining oil in Nigeria elicited a topic for further discussion. It was so unfortunate, a company like Shell which is an internationally recognized brand did not intervene to prevent the execution of these people. Saro and others were essentially saying that the companies should invest in making profits but be mindful of the impact the businesses have to the immediate community. These activists were indirectly saying, “it is not all about your profits, mind about us too, our welfare, we are stakeholders in this!” this is an implication that, energy especially petroleum products are highly valued, and the local communities have become conscious of this and therefore demands substantial corporate responsibility. This may be either through creating jobs for the locals, preventing environmental pollution or observing various treaties thereof. (Andrachuk 2008, p.378)).In this note, the stakeholder’s theory opined by Friedman would in turn urge that, it was not the responsibility of the company (Shell) to intervene here. Instead, it was purely under the precepts of the state to deal with public problems while the corporation focuses on its core mandate of maximizing returns for its stakeholders. (Jenkins 2005, p.213)
Therewas another case of Enron when it tried to do themanipulation to the electricity to maximize its profits at the expense of the citizens of California. The other MNCs such as De Beers have received accusations for taking advantage of lacuna in law to rip significantly from African civil wars (Kerchoffs 2010).There is also the case of Exxon Mobil regarding supporting repressive regimes and military activities thus leading to deaths in Indonesia (Mapelli 2016,p.55). Other companies have also been blamed for child labor and failing to adhere to the requirements for minimum labor requirements.
Local and multinational enterprises create the common pool of wealth, where the people can improve their standards of living. The energy sectors have largely impacted the commercial market, by offering income to a large number of people. Expanding to other countries provides chances to the people in the host countries, to secure employments and earn a decent living. It is the responsibility of the companies, to create the employment directly to the countries in which they operate. According to the survey conducted by Jenkins (2005), energy sector is instrumental in running the economy. Based on his research 90% of the manufacturing processes are controlled by supply of petroleum products, and subsequently determines the employment rate in the country. Similarly, Kerchoffs (2010) opines that the number of petrol stations is increasing all over the world, which creates subsidiary businesses such as stop over shops. As a way to give back to the society. One area that has been ignored by the sector is security of the employees, who work in mining and distribution of the energy products. The final products are flammable and contain some benzene components that are harmful to human health. Study conducted by Kerchoffs (2010,) opines that the health of people working in oil mines and distribution channels are at risks of dangers associated with the product (Aupperle et al. 1985, p.446). He further noted that few companies have institutioned strategic measures to curb the problem, which raises the eyebrows of this commercial activity. The operations of various companies in the sector have attracted the attention of the body that regulates energy (OPEC). The organization sets out clearly the responsibilities of the companies in protecting the health of the workers. Upholding the safety of employees is a critical objective that should be dealt with much emphasis.
In the European energy sector, several empirical research for instance that by (ECOTEC 2007) indicates various electricity and gas companies have been compelled by the issues of global warming, climate change, pollution and economic aspects of sustainability to be more conscious of considering CSR in their operations. The main argument made on this is that, although the energy companies may be operating with important motivation being profit, it is even more prudent to view these operations from a CSR perspective. The energy companies are supposed to contribute immensely to sustainable economic development by investing and being champions of best practices in their host countries. The practices include improving local infrastructure, fighting climate change which could be detrimental to their productivity and so forth. The sustainable energy sector is to be indicated by several other factors including competition, diligence, and mitigation of corruption, research,and development(Kerchoffs 2010)
Such operations have been thwarted by other stakeholders especially the consumers, the general public, the activist’s groups and so forth. All these continue to weaken the shareholders’ value theory, and instead, saying— any corporate with significant impact should deliver more than just profits to its shareholders. The main issues of CSR are mainly felt in the developing countries primarily due to weak government structures and corrupt regimes. These multinationalcorporations can actively have a positive impact on these economies if they have proper CSR strategies that are more inclusive of all stakeholders (Mapelli 2016, p.34).However, the proponents of private corporations as democratic institutions will argue that the institutions are private and therefore non-political actors. The only thing that could compel them to engage in the political activities would be due to perceived interests either in making profits or to influenceindividual decisions with impact to their operations(Carrol 2008,p.45).
Corporate social responsibility has been to some level not been so active across the globe due to weak international laws guiding the operations of MNEs.I.e., there are nervous systems to hold the MNEs accountable and socially responsible for their various actions and practices (Weber 2014, p.23). There are some factors which cut across the national borders such as issues of human rights, climate change, corruption, diseases, and insecurity that cannot be handled by a nation unilaterally but requires to be given multilateral attention. Some of the big multinationalcorporationsare blamed for such issues as corruption, general ecological problems and cooperating with regimes that are repressive (Kerchoffs 2010).Outside the state mechanisms, there still exists a significant lacuna in the regulatory framework of the corporationsregarding meeting their social responsibilities. Whereas the international law is mainly meant to guide the inter-state interactions, its application to the MNCs is not well defined. That in effect implies thatthere is nothing to deter the corporations from dangerous activities like violations of human rights, degradation of theenvironment and so on (Jenkins 2005, p.213)
Some countries especially USA have made significant progress in drafting legislation pieces whose aim is to hold the MNEs operating in theUS. The strategy is aimed to hold business people accountable for any unethical practices arising from their operations. The most significant being the Alien Tort Claims Act, which makes it possible to try and charge within American jurisdiction, any corporation that acts in criminal and inhumane activities in the USA (Mapelli 2016, p.40). The other laws enacted to put the MNCs in check are the Foreign Corrupt Practices Act and the Sarbanes-Oxley Act. The holding liable of the MNEs is a step in the right direction to fostering an increased social responsibility of the MNEs and other companies. (Friedman 1970, p.220)
Despite there having no concretized precedents guiding the operations of MNEs and other corporations, bilateral agreements have proved to be effective in protecting the investment companies make in the other countries. It has promoted direct foreign investment. The international non-governmental organizations such as UN and OECD have taken a leading role in enhancing codes of conduct for CSR especially in matters related to theenvironment, corruption, health, human rights and others. The principles championed by these organizations are mainly on avoluntarybasis (Mapelli 2016, p.34). A good example is that of OECD which has highlighted various principle guiding best practice especially in matters of fighting corruption, environmental conservation, human rights, supply chain management, thewelfare of the consumer, andlabor relations . All this helps the MNEs to be more inclusive in their approaches. The leading countries that have signed an adherence to these guidelines are mainly the ones offering direct foreign investment as well as having the lion share of the majority of MNEs. Nevertheless, the instructions are not enough; more commitments need to be shown through thesigning of treaties which compels the signatories to honor their obligations. (Kerchoffs 2010)
There are other significant principles and declarations such as Global Sullivan Principles and ILO Tripartite declaration and UN Norms and Declarations. They have been employed to ensure that the MNEs are responsive to their social responsibilities in matters such as human rights, obeying laws of nations under which they operate, improved wages for their employees especially in the developing countries, fight against corruption, improve labour standards, help minimize adverse environmental impacts while at the same time contributing to development initiatives.The UN also enacted the Principles of Responsible Investment in 2006 whose primary goal is to encourage the financial markets to focus on the long-term business objectives of sustainability, stability and inclusivity (Jenkins 2005, p.213)
However there are other activities which have intensified pressure on the MNCs to be more sensitive of their social responsibilities. The civil society groups have become powerful entities that can bring the large corporations to task. The NGOs have been pressurized to behave especially with the growing transparency of the internet age (Weber 2014, p.20).Some corporations have neglected upholding CSR practices. They have appreciated the fact that to operate efficiently as legitimate units and due to the changing demands from across the divide, it cannot be business as usual. More and more MNCs are becoming more responsive to the corporate socialrequests. The examples of British Petroleum have started taking more political responsibilities and other social activities such as fighting for human rights and regulating their operations to fit well in the big picture as part of the more substantial citizenship (Mapelli 2016, p.25)
Basically, globalization has itself brought a significant impact on the operations of multinational corporations. Significant influence has been for the MNCs to quickly adapt to their CSR practices. The traditional model such as that of shareholder value theory which mainly emphasizes profits of the business enterprise on top of everything else is no longer tenable. Pressure for the corporations to adopt more diverse issues of CSR has come from several quarters (Kerchoffs 2010). These are mainly from the social society groups demanding for better practices, national laws implemented by some countries like USA, guidelines,and principles laid down by the various international organizations.
The corporations have also found it more prudent to induce the CSR practices in their operations due to realized benefits to be accrued in the long run. In the energy sector, most of the companies involved in the industry have embraced CSR mainly through environmental issues (Mapelli 2016, p.67). A number of the companies such as Shell and British Energy have also started shifting focus to other far-reachingproblems especially in the political domain such improvement of labor standards, fight against corruption, development of corporate transparency and fighting for human rights. However, the level of the corporate involvement in the issues of CRS is still not comprehensive. A significant lacuna still exists primarily in theenactment of a comprehensive legal framework to compel the MNEs to adopt CSR practices in their operation.
Many businesses have been changing focus from just being centred on the interests of the investors/shareholders to widening the scope of its stakeholder list. Multinational corporations (MNCs) and other big companies continue to expand their influence not only within their nations of origin but are also involved in shaping the international policies and the whole society within which they operate. The major proponents of the CSR opine that for the global markets to function effectively, then the businesses have to conduct themselves in a socially responsible manner meeting or exceeding all stakeholders’ interests (Weber 3-27).
As the business continue to grow and expand across the borders, there certain pertinent issues that arise especially in regard to environmental protection, human health, poverty, human rights, anti-corruption and so forth. These factors are very critical to the success or failure of any business venture. It therefore calls for the companies and other agencies to respond to them positively. Several factors have increased the activities related to CRS among them: declarations, guidelines and principles set by international organisations like UN, increased interests from investors in support of responsible business practices, more informed public which demand corporates to be more responsible in their operations, as a necessity for maintaining a good public corporate image, among others(Carrol 19-46).
The theory of Milton Friedman of shareholder value argue that the driving force of any business is to maximize the returns for investors. The concepts profit maximization was the only social responsibility and is widely being phased out from all corners (Jenkins 2005, p.123). For any business to operate efficiently and become profitable in the longrun, all interests ranging from shareholders, employees, consumers to the communities under which the companyserves must be taken into consideration. There is no business which can work in a vacuum.It is only the corporations which gives greater emphasis to CRS that become attractive and hence have a higher edge in the market. This is a position that has been shared by various executives and business managers globally (Friedman 1970, p.222).
Most of the multinational corporations are very massive and control considerable revenue further augmented by their mobility and ability to shift their resources and operate in the locations where they feel more profitable(Mapelli 2016,p.30). They also enjoy a legal latitude under which to work. This, therefore, means that in the country they are working, the governments have to be lenient in dealing with them, orotherwise, they shift leading to loss of jobs. One perfect example is Apple which chose to do its production in China, due to cheap labor.However, there are limiting factors that limit the operations. Despite the MNCs being mighty, more pressure builds on the top management to pay attention to the demand from the global financial markets while at the same time trying to balance with high-profit margins to avoid hostile takeovers (Weber 2014, p.23).Alongside, the theory of shareholders value gains immense consideration. Jenkinns(2005,p.213)extends the arguemnet by affirming that when the value of the stock goes down, the investors will start looking for other competing companies to invest in. It is the pressures of the shareholders or investors that may make managers limit the corporate social responsibility only to a bare minimum. With these increased operations and geographical operations, many issues arise thereof which cannot be regulated unilaterally for instance issues of climate change, insecurity and so forth. Other actors come into place such as non-governmental organizations (NGOs), Civil Society groups gain a lot of influence on the activities of these multinational corporations (ECOTEC 2007).
The globalization issues, especially regarding environmental and social problems, have become some critical factors shaping corporate strategies and various government policies. This is mainly as a result of increased level of interdependence amongst countries and organizations. The MNEs are becoming overly big and complicated and therefore have to conform to the matters of CSR in one way or the other. Globalisation has a significant influence on the operations of multinationals. Many corporates have adopted the concept of CSR as a result of efforts from several quarters. These are mainly the government law’s enactment, international organization bodies such as UN, as well as the companies adjusting themselves to accommodate operation issues (Mapelli 2016, p.45).
Globalisation has continually impacted the operations of various organizations in the world. With the improved ease of international trading policies, businesses have found it easy to enter into new markets. The way a firm operates influences the immediate society, and also the employees. According to the standards of operations which are embraced by all nations, it is the responsibility of any organization to uphold the safety and economic wellbeing of the host country. To achieve formidable support from the community, the production should be conducted ethically. The impact of a company’s activity affect the entire society, either positively or negatively.
The companies in the energy sector have a huge role to play, to ensure that the extraction and distribution of the products is done without exposing the lives of the people in danger. One method to control misconducts among the investors is to enact stringent measures, to control petroleum products commercialization. From the recent past, studies have shown that people residing in areas where oil is extracted threaten their lives. The spill overs are directed to the water bodies, hence increasing the chances of contracting chronic diseases. Similarly, with the modern technologies, the concerned companies are able to drill multiple wells at a faster rate. The situation has increased the acreage of unfertile and rugged land, denying the locals the opportunity to carry out farming and other infrastructural developments. Globalisation will continue to affect the operations of the businesses in the world. All sectors should work corporately to ensure the changes do not impact the social responsibilities of organizations negatively.